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Issues: (i) Whether the authorised officer acted arbitrarily in forfeiting 25% of the bid amount after the purchaser failed to pay the balance within the extended period under the SARFAESI Rules; (ii) Whether the High Court was justified in directing refund of the forfeited amount on the ground that the secured creditor would otherwise be unjustly enriched.
Issue (i): Whether the authorised officer acted arbitrarily in forfeiting 25% of the bid amount after the purchaser failed to pay the balance within the extended period under the SARFAESI Rules.
Analysis: Rule 9 of the Security Interest (Enforcement) Rules, 2002 governs sale of immovable secured assets. Sub-rule (3) requires immediate payment of 25% of the sale price, sub-rule (4) permits payment of the balance within 15 days of confirmation or such extended period as may be agreed in writing, not exceeding three months, and sub-rule (5) mandates forfeiture on default. The Court held that forfeiture under sub-rule (5) is a statutorily sanctioned penal consequence. The power is discretionary to the extent of permitting extension within the statutory ceiling, but no bidder has a right to further extension as a matter of course. Interference is warranted only in a very exceptional case showing patent arbitrariness or unreasonableness. On the facts, the purchaser had already been granted one extension, sought only a further limited extension, did not pay within time, and the record did not disclose any manifest arbitrariness in refusing more time or in ordering forfeiture.
Conclusion: The forfeiture was valid and not arbitrary.
Issue (ii): Whether the High Court was justified in directing refund of the forfeited amount on the ground that the secured creditor would otherwise be unjustly enriched.
Analysis: The doctrine of unjust enrichment applies only where there is receipt or retention of a benefit that is unjust. The Court held that money received pursuant to a public auction under the statutory scheme is not a private windfall, and forfeiture under Rule 9(5) is a consequence expressly authorised by law. The Bank did not derive an unjust benefit merely because the asset was later sold for the same amount. The validity of forfeiture must be judged with reference to the circumstances existing on the date of the order, not by supervening events. The special regime under the SARFAESI Act prevails over the general law of contract, and writ jurisdiction cannot be used to displace a lawful statutory consequence in the absence of arbitrariness, mala fides, bias or irrationality.
Conclusion: The High Court was not justified in ordering refund on the ground of unjust enrichment.
Final Conclusion: The forfeiture order was upheld, the writ court's interference was found unwarranted, and the appeal succeeded.
Ratio Decidendi: Forfeiture of the bidder's deposit under Rule 9(5) of the Security Interest (Enforcement) Rules, 2002 is a statutory penalty that ordinarily cannot be interfered with unless the decision-making process is shown to be patently arbitrary or unreasonable, and supervening circumstances such as a later resale at the same price do not by themselves establish unjust enrichment or justify writ relief.
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